Family Shifts Add to Doubt at Dow Jones

Saturday

Jul 28, 2007 at 4:17 AM

The Bancroft family’s deliberations on a sale of Dow Jones to the News Corporation took several bizarre turns Friday.

RICHARD PÉREZ-PEÑA and ANDREW ROSS SORKIN

The deliberations of the Bancroft family over whether to sell the publisher of The Wall Street Journal to Rupert Murdoch’s News Corporation took several bizarre turns yesterday as family members switched sides, sniped at one another and even sought to change the terms of the offer and of their own family trusts.

William C. Cox Jr., one of the Bancroft family elders who control Dow Jones & Company, publisher of The Wall Street Journal, has switched positions and now favors the sale, a person close to the family said yesterday.

Adding confusion to an already murky vote, some representatives of the so-called Denver trusts, which control about 9 percent of the company’s voting shares, are holding out for a higher price than the $60 a share that the Dow Jones board agreed to accept, said people briefed on the matter, who asked not to be identified because they were not authorized to discuss it publicly.

On a separate front, family lawyers are trying to change the voting structure of the biggest family trust in order to allow family members to vote their shares independently. That trust, unlike some others, including the Denver trust, could be voted on only as a block.

The new structure would allow Christopher Bancroft, a Dow Jones board member and a vocal opponent of Mr. Murdoch’s offer, to vote his shares against the deal and his relatives to vote for it if they wished. Mr. Bancroft controls a large block of shares — 14.5 percent of the total vote as of January — as both owner and as a family trustee.

Since Mr. Murdoch’s offer for the company was made public almost three months ago, factions among the Bancrofts have been arguing for or against accepting the deal, with disagreements among the intensely private family sometimes spilling out into public view.

The Bancroft family and its trusts hold 64 percent of the Dow Jones shareholder vote. Close to half the vote is opposed to a sale, some is in favor, and some is still wavering. Most of the outside shareholders are expected to approve the deal.

Michael B. Elefante, an adviser to the family and the primary trustee of the Bancroft trusts, told the special negotiating committee of the Dow Jones board that, based on his consultations with family members, the decision was still too close to call, according to a person with knowledge of the board’s deliberations who asked not to be named because he was not authorized to comment publicly. This person added that Mr. Elefante, a lawyer at the Boston firm of Hemenway & Barnes, indicated the family was “knocking on the door” of approving the deal.

Still, the confusion appears to be trying the patience of Mr. Murdoch, who yesterday reiterated his threat to walk away from the offer if the Bancrofts could not reach a decision by Monday, according to people involved in the talks. News Corporation plans to give the family until the end of the day on Monday. Yesterday, one of the Bancrofts, Crawford Hill, sent a long e-mail message to other family members, arguing that they had neglected to ask hard questions of Dow Jones management in the past and that, “with all due respect, it is time for a reality check.”

“We, despite the attempts of a few, have not until very, very recently acted as successful owners do. We are actually now paying the price for our passivity over the past 25 years,” he wrote in the letter, which was posted on the Journal’s Web site.

Mr. Cox, a former Dow Jones executive, opposed the offer for months but recently began to waver, other family members said. Still, as recently as a family meeting last Monday, he appeared ready to vote against it, they said.

Calls to Mr. Cox’s homes in Massachusetts and Florida were not returned. The person who said his position had changed could not offer an explanation for the shift.

Mr. Cox, 76, had formed, along with his sister, Jane Cox MacElree, the major bloc most firmly against selling the company to Mr. Murdoch. Mr. Cox and his wife and their children are said by people briefed on the family’s workings to control about 8 percent of the Dow Jones shareholder vote, either as owners or trustees; Mrs. MacElree controls about 15 percent.

People close to the family and the Dow Jones board gave differing accounts yesterday of the stance of the Denver trusts. One said the trustees planned to vote no, which would be an odd twist because opponents of the deal were counting on family members who oppose it, not those who favor a sale but want more money.

But others said that so far the Denver trusts were simply refusing to commit.

According to one family member and a person close to the family, the Denver trusts differ from most of the dozens of other Bancroft family trusts in that there is no family member who sits as trustee. Voting control, the family member said, rests primarily with Lynn P. Hendrix, a lawyer with the Denver firm Holme Roberts & Owen, and it is Mr. Hendrix — not family members — who is demanding a higher price.

Mr. Hendrix declined to comment yesterday.

The Dow Jones board has agreed to the $60-a-share price offered by Mr. Murdoch, for a stock that was trading around $36 before the proposal became public knowledge. People briefed on the matter said the Denver trusts were seeking a higher price, for all shares or just for Class B shares, most of which the Bancrofts own.

The Denver trusts recommended that News Corporation pay public shareholders less, about $58 a share, so it could pay the Bancroft family as much as $66, said people with personal knowledge of the talks.

But Mr. Murdoch has been adamant that he will not pay more. When News Corporation heard about the Denver trustees’ counterproposal, executives and their advisers put on a full-court press, calling members of the family, trying to persuade them to change their minds. According to someone familiar with the campaign, News Corporation said the Denver trust position was “not on the menu” and compared it to “going to a Chinese restaurant and ordering pizza.”

People close to the Bancroft family and the Dow Jones board say that M. Peter McPherson, the Dow Jones chairman, has stated that he opposes a two-tiered price because it would invite lawsuits from investors whose shares sold for less.

The person with knowledge of the board’s deliberations said Dow Jones would “take ‘no’ ” before accepting a two-tiered offer, adding that “in today’s corporate governance, these guys are dinosaurs,” referring to trustees who want preferential treatment.

Even before these latest shifts, the fate of Dow Jones was too close to call, people close to the family’s deliberations said.

“It’s not at all clear which way this thing goes,” one of them said. “There’s some last-minute jockeying for position, but it’s hard to tell how serious it is.”

The Denver trusts hold shares for the most deeply divided of the family’s three branches. The primary beneficiaries are three siblings in the family’s oldest living generation, which controls an overwhelming majority of the family vote.

The third branch of the family is in favor of selling to News Corporation.

About 7 percent of the shareholder vote is controlled by the Ottaway family, which has said its members will vote against the sale.

About 29 percent is controlled by people outside the Ottaway and Bancroft families. A great majority of that vote is expected to favor the deal, but there are likely to be scattered dissenters. And in any deal, some shareholders simply do not vote.

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